Why IT Costs Are Set to Soar — and What Procurement Must Do About It

When Tech Budgets Outpace Growth: Why Procurement Must Act Now

Global IT spend is projected to grow by 9.8% in 2025 (according to Gartner), surpassing the already strong CAGR of 8.0% from 2020–2024. This significantly outpaces global GDP growth. It means IT spend will take up a growing share of company revenues.

And this already translates into rising IT budgets: Across all industries, 64% of companies report increasing their IT budgets in 2025. The concrete reasons are well known, yet complex: Key drivers include AI adoption, vendor lock-ins, vendor forced migrations, licensing changes, complex transformation projects, cybersecurity—and the list continues to grow.

Easing pressure on IT budgets is becoming a central concern across industries. For CPOs, CFOs and procurement leaders, this should raise urgent questions.

Cost Overruns, Lock-Ins and Complexity: Are You Ready for the IT Squeeze?

IT spend is caught in a perfect storm—soaring demand is colliding with tighter vendor control and rising complexity. Each sub-category brings its own acceleration in cost.

Software is leading the surge: SaaS prices jumped by 12.3% in 2024, as forced transitions and vendor lock-ins drive up TCOs. Licensing upheavals like Broadcom’s VMware hikes only add pressure. Software spend per employee is forecasted to increase by 22% by 2029.

AI budgets are growing at a CAGR of ~29%, pushing the market toward $1 trillion by 2031.

Hardware faces future risks from consolidation (e.g. HPE–Juniper) and fragile global supply chains.

IT Services are increasingly burdened by complex migrations.

And in the cloud, 92% of companies exceeded their budgets—by an average of 47%.
 

From Firefighting to Forward Planning: 3 Procurement Moves That Work

With IT spend accelerating, procurement must shift from reactive cost control to strategic management. Start with category-specific strategies: re-tender hardware every 2–3 years to maintain price pressure. For monolithic software, plan years ahead—your leverage is strongest before the contract is signed.
 

1. Strategy:
Procurement must anticipate budget pressures by getting involved earlier, challenging assumptions, and leveraging cost forecasts.

2. Competition:
Competition works: Vendor-neutral RFX, standardized rate cards, and firm renewal playbooks drive real results. And don’t forget the bigger picture—procurement isn’t a side process. IT teams must understand that success doesn’t follow just a plan–build–run cycle, but a plan–build–run–procure cycle. Involving procurement early unlocks value and ensures control.

3. Transparency:
Lastly, invest in IT cost transparency. TCO modeling, usage analysis, and spend visibility are no longer optional.
 

The time to act is now—before margin pressure becomes structural.

From Order-Taker to Challenger: What Real Procurement Partnership Looks Like

IT procurement must evolve into a true business partner—challenging IT at eye level with a clear understanding of operational priorities like stability and performance, while ensuring commercial viability. Since up to 80% of IT costs are determined during the planning phase, procurement must be involved early to steer decisions.

Various industry benchmarks suggest that embedding procurement from the start of IT sourcing and transformation projects can unlock cost optimisations of 10–20%—without compromising on functionality, scalability, or timelines.

It’s time to rethink the IT lifecycle: not just plan–build–run, but plan–build–run–procure. Embedding sourcing strategy from the start helps prevent cost traps and enables scalable, sustainable IT investments.